What is reported as

property, plant and

equipment?
Property, plant and equipment is the long term or noncurrent asset section of the balance sheet.
Included in this classification are land, buildings, machinery, office equipment, vehicles, furniture
and fixtures used in a business. Also included in property, plant and equipment is the
accumulated depreciation for these assets (except for land, which is not depreciated).

The assets reported as property, plant and equipment are described as long-lived, tangible
assets. They are also described as fixed assets or as plant assets.

Generally, the property, plant and equipment assets are reported at their cost followed by a
deduction for the accumulated depreciation that applies to all of these assets.


IAS 16 - Property Plant and Equipment

Measurement, recognition, depreciation, impairment de-recognition and
disclosure requirements for fixed assets.

The following chart identifies the most salient points of the standard, describes the key issues
for each and then offers some notes related to the integrated solution available in Activa Asset
Management. More information on these subjects is contained in the following pages;

Fixed Assets Register
Depreciation Methods
Procurement Capex Budgeting
Procurement Capex WIP
Valuation, Revaluation & Impaiment
Asset Verification & Audit
Multi currency and FX reporting

Item Context Notes
Recognition of
property, plant
and equipment
An item of
property, plant
and equipment is
only recognised if
Activa recognises
owned, finance
leased, hire
purchased,
it has future
benefits, is in the
control of the
organisation and
the cost can be
measured reliably.
operating leased,
trust and loaned
assets.

It provides for
separate
acquisition dates
and acquisition
values for each
depreciation book
with appropriate
processes for
defining the
acquisition event.
Property, plant
and equipment
includes the
replacement of
major parts,
replacement as a
whole or
refurbishment.
Naturally,
redundant or
replaced parts are
separated from
the original asset
record using the
asset 'Splitting'
function and then
usually disposed.

All new assets
whether
replacement parts
for existing asset
items, or major
refurbishment
works, are always
created as
separate records in
their own right to
maintain their
acquisition
integrity.

Any 'related'
assets in the
system can be
grouped using a
special facility
called 'Functional
Units'.
Property, plant
and equipment
Additional parts or
components of an
includes major
inspections and
condition
assessment but
excludes day to
day servicing.
existing asset are
also created as
separate new
records and then
grouped with their
parent asset using
the `Functional
Unit`.
Measurement at
recognition
The elements of
the initial cost of
an item of
property, plant
and equipment
includes all of the
costs of
acquisition,
construction,
installation and
commissioning.
The entire chain of
project
documentation,
budget
appropriations,
management
approvals, supplier
purchase orders
and invoice
transaction inputs
combine to form a
permanent and
reliable record of
asset acquisition.
The initial cost
excludes
promotional,
advertising,
administrative or
general overhead
expenses including
re-location or
operating costs.
Costs related to
non-capital
activities are
excluded from the
final capitalisation
process and are
expensed as
operating costs.
The cost of an
item of property,
plant and
equipment is the
cash equivalent
price or, in the
case of a item with
no cost, its fair
value at the date
of acquisition.
Where an asset is
acquired at little or
no cost, a fair-
value revaluation
is applied to bring
its carrying value
to an appropriate
level.
Measurement
after recognition
Measurement of
asset carrying
values may be
Periodic re-
assessment of
asset carrying
determined by one
of two methods;
the cost model or
the revaluation
model.
values and any
resulting
adjustments can
be applied in one
of two ways; the
impairment
adjustment
method or using
the revaluation
method.
The carrying value
for the cost model
is the initial cost
less accumulated
depreciation less
any accumulated
impairment losses
Impairment losses
are applied to
individual assets as
an `Impairment
Adjustment` in the
appropriate period
and will result in a
positive
adjustment to the
depreciation
charge for that
period.
For the revaluation
model the asset is
carried at a
revalued amount
less any
accumulated
depreciation less
any accumulated
impairment losses.
The revaluation
model uses the
Activa revaluation
function to adjust
the written down
value.

Activa Revaluation
generates
accounting
journals for each
asset on a case
basis taking into
account any
Capital
Revaluation
Reserve balances
and the prior
history of the asset
concerned.
The fair-value of
an asset from time
to time is usually
Fair-value
valuations can be
applied to assets
determined from
market based
information and
determined by
professional
appraisal.
using the Activa
revaluation
function.

Multiple
successive
revaluations can
be applied over
the life of an asset.
If an item of
property, plant
and equipment is
revalued then the
entire class of
equipment to
which it belongs
will also be
revalued.
Assets can be
revalued one by
one or by using a
bulk revaluation
facility. This
simplifies the
process
considerably and
ensures that all
assets in the class
are included.
Net revaluation
increments for a
class of assets shall
be credited to the
capital revaluation
reserve. Net
revaluation
decrements shall
be recognised in
the P&L.
This process is
automatically
journalised in the
'General Ledger
Interface'. Net
revaluation values
for any class can
be viewed on-line
at any time.
Depreciation Each item of
property plant and
equipment will be
depreciated
separately over its
useful life.
All items are
considered
individually in the
depreciation
process and the
periodic charges
calculated on a
daily basis.
Resulting values
are displayed on-
line for the entire
life of the asset.
Except where
recognised
Asset records
depreciate down
elsewhere, an
asset will
depreciate
systematically over
its useful life down
to its residual
value and the
periodic charge
will be recognised
in the P&L.
to their nominated
residual value and
then cease.
Periodic
depreciation
charges are
automatically
journalised to the
P&L in the General
Ledger Interface
run.
Major leading Residual values
and useful life will
be re-assessed at a
minumum of once
per annum.
The residual value,
depreciation
method,
depreciation rate
and useful life are
directly related.
These can be
adjusted for an
individual asset in
edit mode, for a
group of
nominated assets
through the Global
Change function,
or by mass import
from a CSV format
file.
Depreciation
Method
The depreciation
method applied to
any asset shall
reflect the
anticipated
depletion of the
future economic
benefits of the
asset to the
organisation.
Activa
incorporates
multiple
depreciation
methods and
these include
Prime Cost
[Straight Line],
Diminishing Value
[Reducing
Balance], Units of
Use [Units of
Production, Life of
Mine], Economic
Depreciation, Sum
of the Digits, Non-
depreciating and
Write-Off.

Depreciation
templates define
elected methods
for any given asset
type to permit
standardisation
and consistency.
Depreciation
methods should
be reviewed
annually and
changed to reflect
changing patterns
of future utility.
The depreciation
methods applied
to assets can be
reviewed at any
time and may be
varied using a
variety of
convenient
methods. Any
change gives rise
to complete
history and audit
trail.

The standard rates
applied to
Depreciation
Templates can be
reviewed as
required.
Impairment The difference
between the
determined
recoverable
amount of an
asset and its
carrying value will
be applied as an
impairment loss or
reversal.
Impairment losses
or reversals are
applied to
individual assets as
an 'Impairment
Adjustment' in the
appropriate
period.
Derecognition The gain or loss
arising from the
sale,
abandonment,
demolition or
other disposal of
an asset will be
recognised in the
Activa
incorporates
multiple disposal
types; Sold,
Damaged, Stolen,
Missing At Audit,
Scrapped,
Obsolete,
P&L. Replaced Under
Warranty, Traded
In, Returned to
Owner (Loaned),
Demolition, Capital
Credit,
Abandoned,
Donated, all of
which denote
derecognition in
one form or
another.

In all cases
disposals give rise
to periodic
journals to
recognise any
profit or loss on
disposal. Capital
Credit is a special
case where the
journals reverse
out the acquisition
and depreciation
charges as an over-
capitalisation.
Disclosures Cost bases for
existing assets,
additions and
disposals,
revaluations,
impairment
adjustments,
depreciation
details and FX
adjustments by
asset class.
These are general
reporting
disclosures. The
sum of the asset
costs determines
the gross carrying
amount at any
time and
incorporates all
additions and any
increases or
decreases
resulting from
revaluations. The
accumulated
depreciation,
useful lives,
depreciation
methods and rates
form part of the
disclosure
requirements. All
of these values are
available for
inclusion in any of
the standard
reporting sets.
Financial
disclosures
relating to
restrictive
covenants or
securities,
capitalised
expenses,
contractual
commitments, and
unaccounted
recoveries made
against asset
disposals.
Restrictive
covenants would
not necessarily be
known unless
specifically
declared. Nor
would any
recoveries against
asset losses.
Contractual
commitments are
known in detail
through un-
invoiced CapEx
Purchase Orders as
would also be
capitalised
expenditure.
Revaluation details
including valuers,
fair-value
methdologies
employed and
historical cost
carrying values.
The valuation and
revaluation
functions require
both the valuer
and basis of
valuation to be
recorded.
Invariably,
reference is drawn
to the official
valuation
documentation for
each asset
included in the
revaluation. Activa
also calculates the
original cost
components and
revalued cost
components of
each revalued
asset in order to
report the
attributable
charges.